Divorce and Refinance

With the economy being what it is… I guess more people are considering divorce. I haven’t seen a “headline” about it, but we’re certainly getting calls! If you’re in that boat, my heart goes out to you… and I have some things you should be considering.

Normally, folks refinance their home to get a better rate, or to go from an adjustable rate mortgage to a fixed rate… or to renovate their home. If you’re considering a divorce, I guess you would fall into the “renovation” part!

As part of this “project” you have to decide if it makes more sense to sell the home and start over – or refinance and get the other person off the mortgage. It critical that you pay attention to this… quitclaim deeds do NOT relieve both parties from the NOTE (the obligation) on the home.

If you’re the one “leaving” the property – you do NOT want to leave this to chance (I’m not an attorney – this is just my humble opinion). We’ve talked to many people (one sweet lady this week), who have a spouse that Quit Claim’s them off of a property… that’s great… but it doesn’t mean you’ll qualify for a new home, because you are STILL OBLIGATED ON THE NOTE. What if the “schmuk” you’re leaving doesn’t make the payments? Yep, they’re going to coming looking for you and your credit report. Okay, so I’ve said enough about this.

If you’re the one in the house, and you’re trying to determine if you guys should sell or refinance, draw equity out and refinance the other person off the loan (I’m hoping that makes sense), then consider these steps…

$$ Pre-settlement analysis:

This is when you should take a hard look at your credit… is your score over 700? If not, a cash out refianance might not be feasibile. You might be able to do it – but your rate might not be the best. Call us, and we can take a peak at your score. Also – do you know what your homes worth? Get an “educated,” professional opinion, don’t rely on Zillow. (again, this is just my advice). An appraisal will cost you $350 or so, depending on how big the McMansion is.

Money for the Refinance:

Okay – so assuming you have a good credit score (Hat Tip! Congrats! You’ve got that goin’ for you!) let’s look at the “finances” of removing a spouse’s responsibility from the mortgage note, and divide equity in the home during settlement.

It’s going to cost you at least $2000 to refinance. Now, if you have a $2000 mortgage payment, you might look at it like I do. You see, when you refinance you skip a mortgage payment – so I figure it kinda’ washes out.

With the money you are going to take out – how much is your new payment going to be??This is the real issue. Is that a payment, once you add the insurance and taxes that you can afford?

If you are relying on child support or alimony or maintenance to make that payment, you’re facing another challenge. Qualifying. That income might not be considered in qualifying you – so call us let’s go over your specific situation.

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A QUITclaim deed is a legal instrument by which the owner of a piece of real property, called the grantor, transfers any interest to a recipient, called the grantee.[1] The owner/grantor terminates (“quits”) any right and claim to the property, thereby allowing claim to transfer to the recipient/grantee.

Unlike most other property deeds, a quitclaim deed contains no title covenant and thus, offers the grantee no warranty as to the status of the property title; the grantee is entitled only to whatever interest the grantor actually possesses at the time the transfer occurs.[2] This means that the grantor does not guarantee that he or she actually owns any interest the property at the time of the transfer,[3] or if he or she does own an interest, that the title is free and clear. It is therefore possible for a grantee to receive no actual interest, and – because a quitclaim deed offers no warranty – have no legal recourse to recover any losses. Further, if the grantor should acquire the property at a later date, the grantee is not entitled to take possession, because the grantee can only receive the interest the grantor held at the time the transfer occurred. In contrast, other deeds often used for real estate sales (called grant deeds or warranty deeds, depending on the jurisdiction) contain warranties from the grantor to the grantee that the title is clear and/or that the grantor has not placed any encumbrance against the title.

Because of this lack of warranty, quitclaim deeds are most often used to transfer property between family members, as gifts, placing personal property into a business entity (and vice-versa) or in other special or unique circumstances.[citation needed] Quitclaim deeds are rarely used to transfer property from seller to buyer in a traditional property sale; in most cases, the grantor and grantee have an existing relationship, or the grantor and grantee are the same person.[4]

Another common use for a quitclaim deed is in divorce, whereby one spouse terminates any interest in the jointly owned marital home, thereby granting the receiving spouse full rights to the property. For example, when a husband acquires the marital home in a divorce settlement, the wife could execute a quitclaim deed eliminating her interest in the property and transferring full claim to the husband quickly and inexpensively

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I see myself differently than most loan officers in the Cary/Raleigh market. As a rare Cary native, I see myself as an expert on the area, on mortgage industry changes & factors that effect rates! I've lived in Cary since 1968 - and I'm second generation "mortgage." I work with my husband, Steve Thorne Mortgage Loan Originator #60596 Equal Housing Lender